Okay...so you've visited countless websites,
received instant quotes and colorful benefit
descriptions with enough small print to make
you scream...WHAT DOES IT ALL MEAN (and who
writes this stuff)!!!

Well we didn't write it but after years of
reading it, we have boiled down the various
plans to 5 key elements...and if you
understand just these points...you will be
able to walk into the health insurance
market with confidence (and a fair amount of
sanity left).

So before we get started, let's list the 5
points:

1. Doctor doctor...which doctors
you can see and how
that access is handled2. Premium premium premium...are
people paying too
much to over-insure the small
bills?? Let's see.
3. The Big What-if...the real
reason you are buying health
insurance...big bills
4. Pennies on the Nickel??...from
the doctor visit to the
broken leg - getting the real story
on the small bills
5. RX dollars...prescription
coverage going up up up

Now granted, there are tweaks and twists
between the plans, but with the above 5
points, you already have 90% of it...the
other 10% you can ask us.

So let's get started. HMO, PPO, EPO...what
does it all mean. We will take a good look
at what they are but more importantly...how
they affect your care. Let's take a closer
look...

HMO...PPO...EPO???
What does it
all mean.
Well...
rather than
give you the
long version
of each
term, let's
get to the
heart of
what each
is, and more
importantly,
how it
affects you.

First a
stroll down
medical
memory
lane. Up
until the
mid 80's
(wow...last
century),
medical
insurance
was pretty
straight
forward.
You can go
to any
doctor and
the
insurance
company is
going to pay
a certain
amount. It
was around
this time
however,
that they
came up with
"managed
care". And
voila, terms
like HMO,
PPO, and EPO
made their
entrance.
Well what
are they?

They are
essentially
volume
discounts.

In order to
control
costs, the
insurance
company went
to doctors
and said,
"Look. If
you join our
PPO, we'll
bring you a
lot of
customers
(us the
insured) but
we want you
to discount
your costs
30-60%.
That $100
doctor visit
should be
$60. And if
you join our
HMO, we'll
pay you
$50/month
for each
person who
signs up
with you.
In turn,
there will
be a lot of
people to
make up for
this
discounted
amount.

Now there
are
variations
in a
contract
between
insurance
companies
and doctors,
but
essentially,
they are
offering
volume
discounts to
help contain
medical cost
inflation...and
it worked!!
From the
early 90's
to about
1997...all
was
relatively
calm on the
insurance
premium
front. We
may have
reached the
extent of
what managed
care can do
as premiums
have risen
significantly
since 1998.

Now that we
have a
behind-the-scenes
view of what
HMO, PPO,
and EPO are
from a
doctor point
of
view...how
do they
affect us??

First let's
break each
one down.

If the old
way (Fee for
Service) was
that you can
go to any
doctor you
wish, then
the HMO
(Health
Maintenance
Organization)
is the polar
opposite.
You choose
one
doctor up
front, and
essentially
all care is
managed
through that
doctor and
with a local
hospital and
medical
group. This
doctor is
referred to
as a Primary
Care
Physician
and he or
she makes
most
decisions on
care and/or
referral to
quotes. The
trade-off
with this
highly
structured
system is
that the
benefits are
very
rich...i.e.
low
out-of-pocket
expense when
you get sick
or hurt.
Some people
swear by
it...others
swear at
it. It
works for
people who
are flexible
and want
low-out-of-pocket
expense.
You
typically do
not find
HMO's
available in
rural
areas...because
remember,
they need
lots of
people to
make it
work.

Back to our
spectrum,
the PPO's
(Preferred
Provider
Organization)
are
somewhere in
between the
"go to
any
doctor"
method of
the past and
HMO's
"choose
one
doctor/hospital".
There is an
extensive
list of
doctors and
hospitals in
Texas from
which you
can go to.
You refer
yourself out
to quotes
and you are
not locked
into one
area or one
doctor. You
receive the
negotiated
rates
(30-60%
discounts
mentioned
above) with
a PPO plan
which can
amount to
significant
savings.
That being
said, you
will help
pay along
the
way...either
in the form
of a
percentage
or a
deductible
(we'll get
into these
in section
4). Now
with PPO's,
you can go
to doctors
who are not
in the
network but
then your
benefits are
significantly
reduced.
Why?? These
doctors are
not offering
the "volume
discount" we
mentioned
above.

Another
variation
not as often
seen is an
EPO
(Exclusive
Provider
Organization).
An EPO has
the exact
same
doctors/hospitals
as the PPO
list but
with no
out-of-network
benefits.
If you go to
a doctor not
listed on
the EPO
list, you
have no
benefits.

Some more
interesting
facts:

In a true
emergency
(and be very
conservative
on this
definition...it
better be
serious!!),
your
benefits
will likely
cover you
even out of
the above
networks.

Sometimes
doctors
participate
in HMO and
PPO...sometimes
just one of
them. You
can verify
your
doctor's
participation
here
under
"provider".

This HMO or
PPO question
is really
the big one
to answer
first if
possible.
You can
always ask
us to
explain
further the
differences
between the
two.

Next...Premium
premium
premium.
Just like
real estate,
it's
critical
when
choosing a
plan. But
don't assume
that a more
expensive
plan is
necessarily
better for
you. Let's
take a
closer
look...

3.
Premiums...the amount you pay each month to keep the policy
in effect...but there's more

Such a loved topic...health insurance
premiums. Just the thought can raise blood
pressure faster than the actual rates seem
to go up. Let's take a closer look and find
out why an expensive plan might not
necessarily be the right plan.

It is a pretty straight forward
contract...as long as you pay the
premiums...the insurance carrier will cover
you, but what exactly are we paying for?
Before we take a look at big bills and small
bills...etc...you need to understand a
fundamental truth about health insurance.

If you are getting great benefits for the
smaller bills...believe me...you are PAYING
FOR IT. It's the equivalent to buying a
car warranty that also covers a weekly
car-wash, oil change every 3,000 miles, and
a new set of tires every two years....sounds
great but the cost would be so high...no one
could afford it!! Health insurance is
very similar...

A simple example (real life) will help
explain this.

Let's say you have a PPO High-deductible at
$47/month that mainly covers the big
bills...any small stuff will be your
responsibility. Compare that to a 30% PPO
plan for $167/month that will cover right
away...leaving you to pay 30%. That means
your doctor visit is going to be pretty
cheap. Remember, it will handle the big
bills pretty much the same.

Now the first reaction to our $47 plan
is..."You mean I HAVE to pay for the doctor
visits and anything else up to $2,250???
That doesn't sound too good!!"

But let's look at it more closely...The
difference in premium is $120/month.
That's $1,440 a year. That's
a lot of small bills you better be having in
order to get any value out of the more
expensive plan. So you're paying a definite
$1,440 to cover a potential $2,250 expense.
That's not smart insurance. You want to pay
pennies on the dollar...i.e. protect with
$47/month from a potential $20,000+ surgery
bill.

Some other interesting facts on premiums:

Rate increases tend to hit the most
expensive plans hardest. Why?? We are now
in a period of extreme medical inflation.
As mentioned in the previous section,
managed care (HMO's and PPO's) did a pretty
good job of keeping costs down but there is
only so much they can do and the results
have shown over the last three years. So
with this rate increase, the plans that are
paying the majority of the bills will feel
it the most. Typically it has been the
HMO's and No-deductible PPO's.

Sometimes, a person can save money by
splitting up policies. For example: a
family rate is based on the
average...father, mother, 2 children. If
you have 1 child and a significant
difference in age between father and
mother...it may be better to have older
spouse alone and other younger spouse and
child together. Try the different options
or tell us
your situation and we will find out the best
option.

Next...the real reason you buy health
insurance...The big what-if. It sounds
ominous but a car accident can quickly add
up to $80-100,000 of medical expenses.
Let's look at how the plans handle this big
what-if...

4.
The real reason to buy health insurance...The "Big
What-if"
I hear it almost daily..."I'm healthy - what do I
need health insurance for??"

The
average person lands in the hospital every seven
years. Almost 50% of bankruptcies in the U.S. are
the result of a sudden medical condition or
accident...and believe me...they were all probably
"healthy".

There is
a double-edged sword in today's medical world.
Improvement in medical technology and capability is
unprecedented with even further developments around
the corner through new genetic advancements. All
this is great but as the capabilities increase so do
the resulting costs. The possibility for the large
medical bill is really why you need health insurance
and this should be ultimately what your plan
protects against.

Maximum
out of Pocket

Most
plans handle this Big What-if with a "maximum
out-of-pocket", quite possibly the most important
part of your medical plan.

It
basically means, if you have a big bill (or a series
of bills) when does the plan pay at 100%. Of
course, this maximum applies to in-network (see
Section 1 Doctor doctor) and for covered benefits.
It usually applies to a calendar year, from January
to December after which it is reset. Typically, the
Maximum includes deductible (we'll talk about the
deductible in the next section - small bills).

For a
simple example...

You have
a $2,250 deductible and then a 10% co-insurance up
to another $500 maximum. The unforeseen "what-if",
a car accident occurs with $80,000 of covered,
in-network medical bills. After you have paid
$2,750 (your $2,250 deductible and $500 max), then
the insurance carrier will pick up the rest of the
bills according to your covered benefits.

An
interesting fact...

Sometimes plans have great benefits for smaller
bills but the "back-end", meaning the big bill is
not as good. What good is a $45 doctor office visit
copay if you have to pay $5,500 for a big bill?!?
Remember, this "back-end" is really why you are
buying health insurance. If you are getting better
benefits for the small bills...guess what...you are
probably paying for it in your monthly premiums.
That being said, let's look at how the plans handle
the small bills.

Pennies
on the nickel?? Understanding how plans treat the
smaller bills from doctor visits to minor surgery...

5. Pennies on the nickel?? Insight
into how plans handle the
smaller bills.

Now small bills
basically refers to
everything up to
your
maximum-out-of-pocket
(see
Section 3 - Big
Bills).
There are different
ways each plan
handles these
expenses so lets
explore them and
more
importantly...their
costs to you.

Up to your maximum,
each plan handles
smaller bills in one
of three ways. By
small bills, we mean
everything from your
doctor visit charge
to minor
surgery...essentially
what falls below
your maximum
(because it goes
100% after that
anyway!!). Let's
first understand
what these terms
are, and then really
understand how much
it costs to have the
bells and whistles.

Deductibles, Copays,
Co-insurance.

A deductible
is an amount that
you will pay 100% of
before the plan
starts to pay.
Think of if as a
pool of money. Once
you have spent your
pool of money out of
your pocket, the
insurance then
starts to kick in.
This amount is
usually in a
calendar year,
January-December.
Sometimes there are
separate deductibles
for specific care
such as maternity.
Now remember, if you
are in-network i.e.
you are Blue Cross
and the doctor is a
Blue Cross doctor,
then you will get
30-60% off because
of the negotiated
rates. Let's look
at an example...

Doctor visit is
$100. Because you
are Blue Cross PPO
and doctor is Blue
Cross PPO, then this
charge may drop to
$60. You pay this
$60 and it applies
to your deductible.

This negotiated rate
is a great benefit
even before you have
met your total
deductible. Now out
in the market today,
they primarily have
what's called a
high deductible
plan (from around
$1,000 to $3,000)
which is for the
person who is really
worried about the
big what-if and
wants to keep their
monthly premiums
down. A great
example of this is
the
HSA
plan which has
special tax
advantages for the
self-employed and
small group.

A Copay is
simply an amount you
pay for a given
service. For
example, a $40 copay
usually means you
will pay $40 for the
doctor
consultation. Keep
in mind that
additional services,
i.e. labs, x-rays,
etc...will have
additional costs.
Sometimes there are
copays on specific
services. For
example, ambulance
or emergency room
visit might have a
copay.

Co-insurance
refers to a
percentage you will
pick up for
services. For
example, a 30% plan
means that you will
pay 30% (insurance
will pay 70%) of the
negotiated rate.

These are
essentially the
three ways an
insurance plan
handles the smaller
bills.

deductible
You pay 100% up to a
certain amountco-insurance
You pay a percentage
up to a certain
amountcopay You pay
a fixed amount for a
certain service

That "certain
amount" above is
typically your
maximum out of
pocket.

Now that we know how
a plan handles the
small bills, let's
understand what it
will costs us.

Obviously the
co-insurance in nice
because you have
"first dollar"
coverage meaning the
insurance company
will help pay with
your first bill.
That being
said...you don't
think they will do
it for free do you?
This is critical.
Let's look at an
example.

35 yr old,
Riverside County,
good health

$2,500 Deductible
PPO plan
$85/month
HMO
plan
$219/month

Now with the first
plan, you have to
meet a $2,250
deductible...translation,
this is mainly for
the big bill.
You'll get
negotiated rates but
all the small stuff
will fall on your
shoulders. Now the
other plan will
start paying 70%
from your first
bill...very nice
right?? But wait a
minute...we are
paying an extra
$134/month for that
first bill
coverage. They both
handle the big bill
about the same (max
is about the same).
$134/month is $1,608
per year!! That
almost makes up for
the deductible
amount in one year!!

Paying a guaranteed
$1,608 a year to
save a potential
$2,500 per year is
not good insurance
and you would need a
lot of small bills
to make it worth
$1,608. Remember,
you want to pay
pennies on the
dollar...not
pennies on the
nickel.
Paying $85/month to
protect against a
$20,000 surgery is
smart
insurance...pennies
on the dollar.

Now for those people
that absolutely want
first-dollar
coverage...great...you
can have it. Just
keep in mind the
above example.
Also, over the last
three years health
insurance has been
hit by significant
rate increases.
Guess where they
typically hit
hardest...Co-insurance
and HMO's.

Now that we feel
pretty good about
the doctors, big
bill and small bill
coverage let's look
at prescriptions.
With brand name
prices increasing
20% a year recently,
it is important to
see how a plan
handles this....

6.
How plans handle what is increasingly the most
costly part of visiting the doctor...prescriptions

Brand name prescriptions have been
increasing 20% per year and despite
the political rhetoric...that's
probably not going to change for a
while.

In case you have been away the last
couple of years, pharmaceutical
companies have changed the way they
market their products. It use to be
that they would primarily market
through the doctor...a "push"
method. Now, with huge advertising
campaigns, they are advertising
directly to you, the consumer in the
thought that you will then go and
request that medication from your
doctor...the "pull" method. Guess
what...there is a cost to all this
and you want to make sure your plan
covers it.

Most insurance plans handle
prescriptions with a copay, a
fixed amount you pay. Typically,
there is a different copay amount
for brand name and generic stemming
from the situation I mentioned
above. Across the board, you
usually find a $10 generic copay and
a $25 brand name copay but make sure
to check the policy...it might be
different.

They also talk about Fomulary vs.
non-formulary. Formulary simply
means that the company recognizes
the drug as being effective and
therefore covered. In all our
years, we have yet to have a problem
with a person receiving a
prescription that was non-formulary.

A recent change which we feel will
probably become the trend is to put
a deductible on brand-name
prescriptions. This basically says,
"Try to use generic if you can."
Why?? Well if a month's supply of
Prylosec is $150 and a person is
paying $65 month for comprehensive
coverage...you can see the problem.
Either rates will shoot up (as with
the last 3 years) or something has
to absorb these costs. That is
where the deductible comes in.

Example...All major health plans
have instituted varying deductibles
based on the plan for brand name
prescriptions for their PPO plans.
The other carriers will either have
to initiate a similar deductible or
continue to raise monthly premiums.
This specific brand name deductible
will be the standard.

Well we have made it
through...hopefully with few scars
and a great deal more understanding
of how to read the plans.

Again, there may be specific
questions you have which we would be
happy to help you with here.

For a final exam, go here
to review plans, rates, and
providers for California Health
Insurance. There will be a test
afterward...you pass by choosing
the right plan at the right price
for you!!